Update On Condotel Mortgage Loan Programs

A condotel unit is a condominium unit within a hotel complex which are individually owned by private owners. For example, a large 20 story hotel can have three floors of condominium units reserved for private individual owners. These condominium units are called condotels or condo hotel units. A condotel unit owner has full ownership of the individual condotel unit, however, the condotel unit owner needs to abide by the rules of the condo hotel homeowners association. Condotel units used to be extremely popular prior to the 2008 Real Estate and Credit Collapse. After the 2008 Real Estate and Mortgage Meltdown, condotel financing became extinct and most condotel unit buyers could only purchase condotel units with cash only because there was no condotel financing available. The great news is that condotel financing is back, however, not too many folks know about condotel financing and many condotel unit sellers are leary if a potential condotel buyer has a pre-approval letter.

Rates And Terms On Condotel Mortgage Loan Programs

Condotel financing are portfolio loans. Portfolio loans are loans that the mortgage lender keeps it on their books and does not sell them on the secondary market. Prior to the 2008 Real Estate and Credit Collapse, many banks and mortgage companies lent on condotels units with 30 year fixed rate condotel mortgage loans or 15 year fixed rate condotel loans. Unfortunately, there are no more 15 year or 30 year fixed rate condotel financing loans available in today’s market because condotel mortgage loans are non-conforming loans and cannot be sold to the secondary market or to Fannie Mae and/or Freddie Mac.  Condotel mortgage loans are 30 year adjustable rate mortgages, also called ARMs. Adjustable Rate Mortgages are 30 year mortgage loans and are fixed for a certain period and after that certain fixed rate period is over, the mortgage rates will adjust will adjust every year for the duration of the 30 year condotel loan term. These loans are not balloon mortgages where it expires at a certain amount of time and needs to either be paid off in full or need to be refinanced. Condotel unit owners do not have to worry about refinancing but the mortgage rates may adjust every year after the fixed rate period is over.

How Do Adjustable Rate Mortgages Work?

Adjustable Rate Mortgages are 30 year mortgage loans with an initial fixed rate period and after that fixed rate period is over, the mortgage rates can adjust every year for the duration of the 30 year loan term. The adjustment of the mortgage rates after the fixed rate period is over is based on the index and margin. The margin is constant and the index is based on the one year treasuries, which is the Cost Maturity Treasuries or CMT. Currently, the one year treasuries is almost at zero and the CMT is viewed as the most conservative index.  We offer the 3/1 ARM, 5/1 ARM, and the 7/1 ARM. How these adjustable rate mortgages work is as follows: Let’s say that the starter rate on a 3/1 ARM is 4.5%. This means that the condotel unit mortgage loan borrower will have a 4.5% fixed rate for the first three years of their condotel mortgage loan and starting year number 4, the mortgage rates will adjust every year based on the one year treasuries, CMT, plus the margin, which is currently at 3%. The margin will remain constant for the 30 year loan term. How the new rates work starting year number 4 is by adding the index to the margin and that will yield the new mortgage rate on the condotel mortgage loan. However, the new rate cannot be lower than the starter rate which was 4.5%.  Our condotel portfolio investor realizes that since the index is based on the CMT that the new adjusted rate will be lower than the starter rate of 4.5%. If based on today’s CMT, the new rate on year #4 when it adjusts, it will be slightly above 3.0%. 3.0% is lower than the starter rate of 4.5% so the new adjusted rate on year #4 will be 4.5% since the new rate cannot be lower than the starter rate. The U.S. one year treasuries needs to go over 1.5% in order for the new rate to be over the starter rate of 4.5%.

Caps On Adjustable Rate Mortgage Programs

The 2/2/6 is the caps to our Adjustable Rate Mortgage Programs. The best way to explain how this works is by example. For example, let’s say you’re doing a loan on a 5/1 arm program with a Start Rate of 4.50%. This would be a fixed at 4.50% for the first 5 years. After the 5 year fixed period, the initial adjustment CANNOT increase by more than 2.0%, putting the max rate at the adjustment period at 6.5%. This is the first 2 on the 2/2/6

Now, thereafter each year, the rate CANNOT increase by more than 2.0%, with a max life time cap of 6.0%. This is displayed by the second 2 and the 6 is the last digit on the 2/2/6. Meaning, after the 5 year period, if the rate were to increase each year by 2.0%, then it would take 3 years for the cap of 6.0% to be reached, putting the max rate at 10.50%.

Ronda Stepp: Florida And Texas Condotel Real Estate Expert

Ronda Stepp is Gustan Cho’s marketing partner and a veteran licensed real estate agent in the states of Florida and Texas. Ronda Stepp, based in Orlando, is a condotel and non-warrantable condominium experts and is familiar with all of the condotel projects as well as new condotel developments throughout the state of Florida and Texas. Ronda Stepp has extensive knowledge in all areas of real estate including commercial and residential properties, second homes, unique homes, waterfront properties, multi unit properties, investment properties, commercial properties. Besides real estate, Ronda Stepp is a marketing expert and a mortgage lending expert in both commercial, residential, and private lending. Ronda Stepp can be reached at 321-402-4944. Ronda Stepp email address is newhomegrp@gmail.com

In the state of Florida, Ronda Stepp is associated with Ameri Team Realty. In the state of Texas, Ronda Stepp is associated with Mersal Realty.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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